Administration of Regional Budgets in 2016: the Crisis Has Not Been Overcome

• Main Author: Povarova Anna I.
• Format: Article
• Language: English
• Published: Russian Academy of Sciences, Vologda Research Center 2017-09-01
• Series: Economic and Social Changes: Facts, Trends, Forecast
• Subjects: revenues; expenditures; deficit; loans; debt load; budget of rf constituent entity; public and municipal debt; increase in budget incomes
• Online Access: http://esc.vscc.ac.ru/article/2333/full?_lang=en

Russian Prime Minister Dmitry Medvedev speaking in the State Duma with the report on the work of the Russian Government claimed that regional budget shortage has been eliminated and the number of regions with public debt exceeding revenues has been reduced [4]. This discussion makes the problem of proper assessment of sub-federal budgets relevant. Their deficit administration and accumulation of debts have become a steady trend in recent years. The past year has been marked by increased revenues and spending cuts, but even under these conditions most regions were unable to implement balanced budget policy: 54 constituent entities of the Russian Federation were running deficits with debts exceeding half their own revenues, which caused the weakening of investment and consumer demand. The situation is exacerbated by the decline in energy prices, destabilization of the Federal budget and a general decline in business activity in the country. The federal policy is also tightening: since 2014, there has been a steady decrease in financial support for territories, which forces regional authorities to address the issues of financing through local sources of revenues. Palliative measures taken by the Government of the Russian Federation provide only short-term alleviation of the situation but do not solve long-term problems. This, in particular, is evidenced by the growth trend of regions’ market debt load renewed in 2016, despite attempts of Ministry of Finance to replace a significant part of market loans with budget loans. This article is a continuation of a series of publications started in 2010 in the ISEDT RAS journal reflecting the results of administration of sub-federal budgets. The purpose for the present study is to identify the peculiarities of the budget process in 2016. Its scientific novelty is determined by a comprehensive analysis which helps assess the condition of territorial budgets by all key parameters and develop specific proposals on measures to eliminate negative systemic factors. The results of this analysis contrast with the results summarized by the Chairman of the Russian Government. The main conclusion is that there are no signs of any improvement in the regions’ budget systems, which, in our opinion, is largely due to the fact that federal authorities adapt to the critical state of territorial budgets instead of systematically solving the problems. The article can be used by government authorities for developing the fiscal policy, experts in finance, students and researchers